Real Estate Exam Review

Which of the following would be considered a foreign person according to FIRPTA?

A company incorporated in France with regional development offices in the U.S. Corporate entities that are formed outside the U.S. are considered foreign persons for the sake of the Foreign Investment in Real Estate Property Tax Act (FIRPTA).

Millie is a buyer who has given her agent an earnest money check for $10,000 with an offer to purchase. When will the check be deposited?

After the seller accepts the purchase offer

Which of these is an example of agency coupled with interest?

An agent foregoes buyer agent commission, provided the purchasing developer gives the agent the listings on the developed lots.

Katelyn wants to include an inspection contingency in her purchase offer. Her agent explains that the inspection contingency will document which of the following?

An inspection contingency typically documents the date by which inspection issues must be cleared. The amount of money the sellers will spend or the issues that Katelyn will overlook won't be known until the inspection itself is complete.

Margot and Steve owned several rental properties at the time of their divorce. The divorce decree gave ownership to Margot in return for a cash payment by Steve. Fast forward six years, and Margot is ready to sell the properties. She soon discovers, though, that Steve's name is still on the title. What's her best course of action?

Ask Steve to generate quit-claim deeds on the properties. Even though the divorce decree grants ownership to Margot, she can't convey the properties until Steve either produces quit claim deeds OR agrees to convey the properties with her.

Ken signed a contract to purchase Debra's condo. Ken signed the contract two weeks prior to turning 18, which is the age of majority in his state. Debra found out about his age prior to the closing but honored the contract, and they closed on the condo a month after Ken's birthday. What was the status of the contract when Ken and Debra entered into it?

Because Ken was a minor when he entered into the contract, he had the option to cancel it (making it a voidable contract). However, the parties to a voidable contract may choose to execute it, which is what happened here.

Which of these statements about the homeowner's right of redemption is true? a) Homeowner right of redemption applies to foreclosures, short sales, and REOs. b) Only foreclosures are subject to homeowner's redemption rights. c) Right of redemption timelines are longer for foreclosures than they are for short sales. d) Rights of redemption window with REOs may have expired.

Because of the length of time it takes to process a property after the foreclosure sale, the homeowner's redemption period may have expired before the lender puts the REO on the market.

According to the rule of thumb, how can a borrower lower the interest rate on a loan by 1%?

By paying four points up front

The Simpsons are buying the Martin's house for $415,000, and closing is set for March 15. The Martins have a loan balance of $230,000 at a rate of 4.7% and have prepaid property taxes ($2,506) and insurance ($1,400), and they also have mortgage interest to consider. Using a 365-day proration method, calculate the prorated amount the Simpsons will owe the Martins at closing. Assume February has 28 days this year. The sellers own the day of closing.

Calculate daily rates for taxes to be prorated: $2,506 ÷ 365 = $6.87. The Martins pay the first 74 days (January 1 through March 15): 74 x $6.87 = $508.38. $2,506 - $508.38 = $1,997.62 owed by the Simpsons. Homeowner's insurance isn't prorated between the buyer and seller. A homeowner's insurance policy is an agreement between the insurance company and the policyholder, so any refund due to the seller/homeowner will be handled between those two parties.

Eileen is preparing a monthly report pursuant to the terms of a property management agreement. This report details actual income received from rent and other fees, along with actual expenses paid. What report is she preparing?

Cash flow report The cash flow report is usually created monthly and shows the current financial status of a property. It accounts for income received (such as rent, late fees, etc.) and expenses (such as utilities, personnel, repairs, etc.) paid.

How are principal meridians and baselines used in the rectangular government survey system?

Each legal description in this system originates at the intersection of a principal meridian and a baseline.

The Crows gave their son, Gibson, the family property, so long as he doesn't join his friend's rock band. If he joins the band, the property goes back to them. What type of estate is this?

Fee simple determinable

Paul and Blake are touring an open house when they notice that the glass on the sliding patio door is very foggy. Is this a concern, and if so, why?

Foggy windows indicate broken seals on dual pane windows, which allow moisture to build up between the panes. This reduces efficiency, which means energy bills may go up.

Two essential elements of a deed are the ______.

Grantor's signature and conveyance clause

Gerald practices real estate in a state that recognizes sub-agency. Which of the following statements is true of Gerald's authority to appoint a sub-agent?

He must receive the principal's permission in writing in order to appoint a sub-agent.

Donald and Martina decided to purchase a newly built home, and their agent, Ed, recommended that they get a professional home inspection done. The couple tell Ed that they thought inspections were only for older homes. How should Ed respond to that?

He should remind them that every dwelling, no matter the age or size, should have a home inspection.

Which of the following scenarios accurately describes the similarities between an open listing and an exclusive agency listing?

In both open listings and exclusive agency listings the seller doesn't have to pay a listing agent commission if the seller finds a buyer.

What approach to value is typically used for investment property of two- to four-family units?

Income approach

In which of these situations is Ronna's fiduciary duty of reasonable skill and care at odds with her duty of obedience?

Jefferson insists that Ronna interpret the implications of him breaching his contract with a buyer.

Andrea and Jim were planning to list their home with Cheryl, but just let her know they no longer wish to work with her. When Cheryl mentioned that listing agreements are legally binding, Andrea and Jim reminded her that their agreement is not legally binding. What would be the reason for this?

Jim didn't sign it. All parties need to sign the listing agreement in order for it to be considered a legally binding contract.

Which ownership type is defined by four unities: time, title, interest, and possession?

Joint tenancy

What is an example of sub-agency?

Kayla is a licensee with ABC Realty and lists a property for seller Devon. Maurice is a salesperson with XYZ Realty Group and brings a buyer to the table, but owes fiduciary duties to the seller. Only the agent working with a buyer customer on behalf of another firm's listing is an example of the sub-agency situation. In this case, that would be Maurice.

Which of the following is the price a lender believes the property will bring at a foreclosure sale?

Mortgage value Lenders won't lend on what they can't recoup. Therefore, the loan amount will be based on what a lender would hope to recoup, should a foreclosure sale be necessary.

Nate represents Elena in the purchase of a house. Katherine represents the seller, Timothy. Which of the following statements accurately reflects the agency duties owed?

Nate owes Timothy the duty of disclosure. A licensee owes all parties the duty of disclosing material facts, as well as honesty, fairness, and accounting. Only a client would be owed obedience, loyalty, and confidentiality.

Don and Becky realized too late that the contract they signed for the sale of their home didn't include any language about a rent-back if the home they're building isn't ready in time. What can their listing agent do?

Once a contract is signed, the document to use to alter the terms is a contract amendment.

What does the lot and block system use to develop a property's legal description?

Plat references

On a closing statement, ______ will go into the seller's credit column and the buyer's debit column.

Prepaids

Governments like property taxes as a revenue source because ______.

Property values, and therefore taxes, tend to remain stable

The legal description of the project, easements that run with the land, and street and traffic patterns are all under consideration when a local planning board ______.

Reviews a developer's project plat

Which of the following statements best describes a listing that terminates by performance?

Roberto listed a property for Terrence. After two failed offers, the property made it to a successful closing. No matter how well a licensee performs his tasks, a listing agreement is terminated by completion/performance only if it successfully closes.

The appraisal report submitted to Jenkins, the lender, notes that the property is being conveyed with all property rights intact. Which step in the appraisal process does this represent?

State the problem.

Natalie is a single mother of twins and receives government assistance to help make ends meet. She's been living with her mother for the last few years but really wants to buy her own home to gain some independence. She's got a little in savings and has good credit, but when a lender turns her away because she receives public assistance she worries that she'll never be able to get a loan. What act prevents automatic discriminatory practices by lenders and protects individuals like Natalie?

The Equal Credit Opportunity Act prohibits lender discrimination on the basis of an applicant's protected class status, such as dependence on public assistance. Its intent is to make credit equally available to all credit-worthy applicants.

Ken, a licensee, has published an ad claiming that he can sell homes for 25% more than any of his competitors. The Federal Trade Commission determined this to be a deceptive ad. What might the FTC require Ken to do as a penalty for his deception?

The FTC may impose informational remedies designed to help consumers understand the deception that occurred. Ken will likely be required to take out new ads to correct the misinformation. He may also be required to include a disclosure in future ads.

Marion gave her granddaughter Sheila the deed to a brand new home, on the condition that Sheila complete her PhD in astronautics. When Sheila dropped out of school and got a job as a greeter at a big box store instead, Marion ______ to regain ownership of the property.

The estate granted to Sheila describes a fee simple subject to a condition subsequent, since it uses the phrase "on condition that." Marion's right of reentry requires her to take legal action to regain ownership if the condition is violated.

The federal Government in the Sunshine Act is part of what?

The federal Government in the Sunshine Act, also known as the open meeting law, is part of the Freedom of Information Act. Sunshine laws require all meetings of zoning boards, planning boards, and local zoning authorities to be open to the public.

Which of these statements about a deed's habendum clause is true? -It describes any easements or liens against the property. -It's a description of the act of conveyance. -It's required in all deeds. -It's the full legal property description.

The habendum clause, if used, describes the type of conveyance. It's typically used if title being conveyed is less than fee simple.

When calculating loan-to-value ratios, which of the following will be used by the lender?

The lesser of the sales price or appraisal value

Real estate professionals handle many documents related to real estate transactions. Which one of the items listed below is one of the most important in detecting mortgage fraud?

The original sales agreement and any addenda to that agreement must be accurate. They should clearly identify the property and all parties to the transaction.

With the cost approach to value, what is the reproduction cost?

The reproduction cost is the cost to build an exact replica of the subject with the same materials and deficiencies, as opposed to the replacement cost, which is the cost to build a functionally equivalent improvement.

Ashton, an appraiser, is estimating value using the sales comparison approach. He applies more weight to two comparables over several others he used. What process is he utilizing?

Through a correlation process, the most weight may be given to one or two comparables, or equal weight may be given to all. The term reconciliation is often synonymous with correlation.

Marsha's title insurance policy was issued on closing day, June 18. The policy lists the standard exclusions as well as requirements for the company to issue the policy, such as paying off existing recorded liens. Which of these will NOT be addressed in the schedule of exceptions?

Title insurance typically covers events or claims filed on the public record before the title insurance policy's effective date but excludes disclosed and undisclosed easements.

When you use a comparative market analysis to calculate a suggested listing price range for a particular property, which of the following actions will you take?

Use adjusted prices from comparables and refine a range using active listings, expired listings, and possibly pending listings.

Which of the following can be defined as what a property is worth?

Value

In the sales comparison approach, which of these are selected and evaluated both quantitatively and qualitatively against the subject property?

When sizing up the competition to the subject in the marketplace, comparable properties must be selected and compared both qualitatively and quantitatively.

You represent a seller as a listing agent. Do you owe any duties to buyer agents?

Yes, the duty to cooperate on showings You owe buyer agents (or seller agents, if you're working with the buyer) the duty to cooperate on showings as well as honesty and fairness.